Chip and P.I.N: Building a better credit and debit card

The days of the swipe and sign transactions with a credit or debit card may be coming to end.

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For the first time ever, stores now have the right to add a surcharge to credit card purchases, as a result of a settlement between retailers and card companies.

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(NBC News) The days of the swipe and sign transactions with a credit or debit card may be coming to end.

Recent massive data breaches at retailers such as Target and Neiman Marcus are prodding banks and others to move Americans to the more secure "chip and P.I.N." cards.

On those cards the magnetic strip is replaced by a heavily encrypted computer chip.

"Right now our system is really old, really insecure. When they put a chip on these credit cards, that makes it almost impossible for hackers to reproduce the cards," explains privacy expert Bob Sullivan.

For another layer of security, the card user enters a personal identification number.

The National Retail Federation lobbied Congress last week for wider use of chip and P.I.N. systems like the ones used in Asia and Europe.

Some countries there saw card fraud decline by more than 70 percent after migrating to "chip and P.I.N.".

"In the future when chip cards are required, hackers won't be able to take a simple data theft and turn it into fraud, this will prevent that," Sullivan explains.

Some retailers have already installed "chip and P.I.N." terminals, but in a nation of 100-million card carriers, the switch will take awhile and cost a lot.